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TPG's ECom-Ohio Reveals Auto Supplier B2B Practices

Columbus, OH _ March 7, 2001 _ A new study from the Technology Policy Group (TPG) offers a great deal of evidence that many automotive suppliers need to accelerate their adoption of e-business practices to remain competitive.

Columbus, OH – March 7, 2001 – A new study from the Technology Policy Group (TPG) offers a great deal of evidence that many automotive suppliers need to accelerate their adoption of e-business practices to remain competitive.

Ohio’s motor vehicle and equipment group (SIC 371) produced nearly one-seventh of US output, second only to Michigan, according to a 1997 Ohio Department of Development report. (http://www.odod.state.oh.us/osr/industry/mtrsnp.pdf) According to a study by ELM International in that report, for example, Ohio has 224 Tier 1 suppliers, compared to 555 in Michigan. That study identified other US Tier 1 suppliers in Indiana (115), Kentucky (48, Pennsylvania (44) and West Virginia (2).

"Right now, Tier 2 and Tier 3 automotive suppliers with e-Ccommerce capabilities have a competitive advantage," says Pari Sabety, Director of the Technology Policy Group. "Within two years, it will no longer be a competitive advantage but a matter of survival".

About 40 %percent of survey respondents are involved in, or exploring internet B2B applications; a similar number are using non-internet-based methods of B2B data exchange, and 20 %percent say they have no interest in B2B applications. Only 10 percent of 434 Ohio automotive suppliers of all sizes surveyed said they were actively involvedwere active in B2B; nearly 20 percent said they did not use computers in their operations. "We are watching the creation of the corporate version of the digital divide," says Thomas Mulready, a consultant who previously served as Senior Vice President for eCommerce Strategy at National City Corporation.

Customers are more likely to require data from suppliers than to provide it. Of the 114 survey respondents who reported some degree of electronic B2B data exchange, 82% percent say they participate in data exchange with their suppliers, and 66 %percent with their customers. There were marked differences in the types of data shared by suppliers and customers; for example, no companies surveyed shared data with their customers about scrap/return rates or quality management decisions, but 12 percent of firms reported that they shared quality data with suppliers. Of the 21 businesses responding who said they do not exchange data electronically with their customers, 57% said they have no need to.

Fax is by far the most common method of data exchange for both suppliers and customers. Forty-seven percent of companies who reported using the Internet continue to rely on fax and other non-internet methods as their primary method of information exchange. "This says to me that there is a great deal of inconsistency among auto suppliers and a gap between customers and suppliers regarding B2B requirements or an unwillingness to invest in B2B technologies," says Mark Baker, who also served as an industry representative for the study’s steering group. He is Manager of Network and Computer Systems at Dana Corporation, a first-tier automotive supplier. "This says to me that a very large part of the automotive suppliers out there don’t have a clue about the B2B requirements of the customers they most want to keep or acquire," says Sue Stagner, a Project Manager at the Toledo-based EISC,Inc. which manages a NIST Manufacturing Extension Program on e-commerce for auto suppliers.

A very low percentage of suppliers, particularly those in tTiers two 2 and three3, said they intend to do business using Covisint. Only 14 %percent of businesses who indicated they were already using the Internet said that they intend to do business using Covisint. Forty-three percent of Tier 1 automotive suppliers planned to participate, 33 percent of Tier 2, and none from Tier 3 or below. "Worthington Industries has always driven our solutions towards the needs of our customers," says Jonathan Dove, Chief Information Officer of Worthington Industries afirst-tier automotive supplier. "Our e-Business direction and systems are designed to be able to respond to our customers requests like Covisint."

"I have heard it said that, after the experience of Y2K, many smaller suppliers are waiting for others to shed blood first," Sabety says. "They want to believe that big concepts like B2B exchanges will break down before they have to participate."

On the other hand, notes Dana’s Mark Baker, "Right now, we are being asked by one of our customers to work on a 2005 model year project that requires participation through Covisint."

"Worthington Industries has always driven our solutions towards the needs of our customers," adds Jonathan Dove, Chief Information Officer of Worthington Industries a first-tier automotive supplier. "Our eBusiness direction and systems are designed to be able to respond to our customers requests like Covisint."

The simplicity of B2B can be complicated to achieve. Among companies who have already implemented B2B, the most common primary obstacle (32%) was more complicated processes32 percent said "more complicated processes" were the most significant obstacle to implementation. "Worthington Industries has three distinct businesses that require unique e-businesseBusiness solutions to support our customers," says Dove. "The challenge is to develop solutions that can leverage technologies and capabilities across the entire enterprise.""We know that a very large part of the automotive supplier community needs help with this issue," says Joe Zielinski, a Certified Business Analyst at EISC, Inc., a Manufacturing Extension Partnership in northwest Ohio, part of a nationwide program to provide assistance to manufacturers. "Considering the B2B requirements of key customers is an essential step in strategic planning today."

The role of a technology champion and/or CEO buy-in is vital. Of the 145 56 companies that reported some degree of Internet B2B activity, 31 %percent said they got started either because of CEO leadership or an internal technology champion. Thirty-five percent said the primary driver was the "need to improve customer service," and 25 %percent said they started with a small, non-mission-critical application. "It is critical to have the support of your CEO to undertake these initiatives," Dove said. "Our Chairman and CEO and our executive team understand how important technology applications can be for inventory management, supply chain and customer production tracking. Our IT efforts are part of our overall business strategy."

"We would love to see Michigan and other states with significant automotive supplier clusters collect some of the same numbers," says Sabety. Ohio’s motor vehicle and equipment businesses (SIC 371X) produced nearly one-seventh of US output, second only to Michigan, according to a 1997 Ohio Department of Development report. (http://www.odod.state.oh.us/osr/industry/mtrsnp.pdf)

"Ohio is the first state in the country to assess in depth its readiness to conduct e-commerce," said Richard Webb, partner, PricewaterhouseCoopers, and formerly CIO of the state of North Carolina. "The project is serving as a roadmap for other governments as they work to define their roles in the digital economy." Both North Carolina and Maryland are initiating or conducting assessments based upon the Ecom-Ohio model.

Support for the project comes from the following Ohio companies who provide steering committee leadership:

NCR (Co-Chair)

Ohio State University (Co-Chair)

Ameritech

Cincinnati Bell

Dana Corporation

Exodus Communications

Greater Columbus Chamber of Commerce

IBM

National City Corporation

Nationwide

Ohio Cable Telecommunications Association

Ohio Health Corporation

PricewaterhouseCoopers

Qwest

Reynolds and Reynolds

Sterling Commerce

Worthington Industries

The University of Akron’s Center for Policy Studies collected the data as part of the ongoing ECom-Ohio project managed by TPG. Two similar TPG studies of important business segments in Ohio -- financial services, and trucking and logistics -- will also be published in June. TPG is housed at OSC, the state's flagship high performance computing and networking resource.